Want your piece of heaven? Homeownership is a dream in India and more so in cities like Chennai. Apart from emotional benefits like satisfaction and security, the home offers many financial benefits in the form of tax advantages. If you know the benefits, you can reduce the cost of your dream home and the tax payable.
Tax benefits designed to ease your financial burden
Let's see how you can take advantage of these advantages to get your dream home and lower your tax bill simultaneously.
1) Background Section 24(b): Interest deduction on home loans.
One of the biggest tax breaks is provided under Section 24(b) of the Income Tax Act 1961. This clause lets you deduct the interest you paid on your house loan.
- Self-Occupied Property: If you are the only house owner, you can deduct up to 2 lakh annually. This can be a huge amount and can reduce your taxable income. This relief is for people with big home loans in cities like Chennai, where property prices are increasing.
- Let Out Property: If you have let out your house, there is no limit on the amount of interest that can be deducted. You can deduct the full amount of interest paid during the financial year. This is very important for those who have invested in more than one house in Chennai's hot rental locations like OMR or ECR. The average cost of 2bhk flats in Tambaram and similar developing localities in Chennai is 65 lacs and rental income is about 16,000/- per month.
2) Building Your Savings: Section 80C: Deduction for Principal Repayment
However, this is only for interest paid; under Section 24(b), you can deduct the principal amount paid back on your home loan.
- This condition allows you to deduct up to Rs. 1.5 lakh each financial year.
- This is included in the 1.5 lakh limit prescribed under Section 80C, which includes investments like life insurance premiums, employer's provident fund (EPF), and public provident fund (PPF).
- In cities like Chennai, where many young professionals are buying their first homes, this benefit would allow them to lower their taxable income early in their careers.
3) Get Started: 80EE: Additional Deduction for First-Time Homebuyers
The government designed section 80EE to encourage even more homeownership.
- This entitles first-time buyers to an additional deduction of up to 50,000.
- Eligibility conditions include owning a house valued at 50 or less and debts not over 35 lakh.
- This is an added advantage for home seekers in the periphery of Chennai, where property rates are often lower.
4) Your Affordable Dream: Sec. 80EEA: Additional Deduction for Affordable Housing
The government felt affordable housing was an immediate need, so it introduced Section 80EEA.
- This clause provides an additional deduction of up to Rs. 1.5 lakh to persons who buy low-cost houses.
- The property's value cannot exceed ₹45 lakh to be eligible.
- This benefit applies to loans granted between April 1, 2019 and March 31, 2022.
- This section is no longer active but was in the past, and more sections like it might be added later.
- Many families who want to settle in the growing areas have availed themselves of this facility, as the suburbs of Chennai are growing rapidly.
5) Your Transaction Costs: Stamp duty and registration fees
Stamp duty and registration fees paid on buying a property are not a direct income tax deduction but can be claimed under Section 80C up to Rs. 1.5 lakh.
- But in cities like Chennai, where property transactions occur more often, these levies account for a large part of the overall home cost.
- This is an added advantage for buyers in Chennai, where land costs are high.
6) Your Investment Strategy: Tax on Long-Term Capital Gains
- If you sell your home after a certain period, you might have to pay long-term capital gains tax, but there are ways to minimize it.
- If you use the capital gain to buy another residential property within two years of selling the first one—an exemption under section 54
- You can also invest the capital gains in specified bonds under section 54EC and claim an exemption.-
- Those changes could help the Chennai homeowners considering moving to another city or making improvements.
7) Your Shared Advantage: Benefits of Home Loans from Cooperatives
Under sections 24(b) and 80C, the co-borrowers on a joint house loan can claim deductions if they are co-owners of the property. With the tax benefits getting doubled, joint homeownership becomes much more attractive.
That's quite common in Chennai. Most families come together and buy a house.
Your Local Advantage: Special Attention to Chennai
Many construction projects are being built in Chennai to cater to the varied requirements of property buyers. From apartments in the city to villas in the suburbs, it is hard to make a choice. However, knowing about tax benefits helps in making an informed decision.
To determine which tax breaks apply to you, you'll need to consider where you live and the value of your home.
Consult a tax advisor to ensure you get the most out of your tax savings.
The property market in Chennai is very much in vogue, and some new properties offer great tax concessions.
Your Path to Financial Stability
Buying a property is costly, but there are tax benefits in India that help you save a lot. If you can leverage these benefits, you can make your home-buying dream come true. These benefits are more applicable in a city like Chennai.
Your Checklist for Tax Savings:
- Understand the prerequisites for every tax benefit.
- Keep detailed records of all costs associated with your house loan, home purchase, and related expenses.
- Consult a tax advisor to ensure you get the most out of the deduction.
- Stay informed about any changes to tax laws and regulations.
Buying a home is a huge investment, but India's tax benefits make it much more affordable. You can use these benefits to your advantage and purchase your dream home. If you buy a home in Chennai, these benefits could be beneficial.
